Posts Tagged ‘IMF’

Today gold rose to a new all time high (again). The up-trend in gold is going much faster than we expected, so actually we were wrong. Though, you won’t hear us complaining of course. The brilliant price of $ 1122 was reached shortly. The temporary downturn we predicted did happen, just not as far as we expected, from $ 1050 in went down to $ 1030. Why did gold go up so far? One side is the downturn the dollar has taken. So your gold only appears to have gone up for a part. The second contribution we have to thank the central bank of India for. They bought the gold the IMF was selling, we wrote about this in a previous post. So after 50 years of gold selling by central banks we now see them buying again (in an other part of the world though). Both these factors had the effect that investors started buying again, resulting in an even bigger gain. We expect the gold price to remain stable for about 1 or 2 months or decline slightly before yet another rise. When we look at the technical chart of gold, and the expectation that both banks and investors will keep buying, we set the new price target for January 2010 at $ 1150.

What about silver? There we did not see such a large gain. This is the direct result of the industrial demand for silver. For a rising silver price we have to count on investors, they still seem to be focused on gold at this moment however. Once they finally realise that silver is undervalued big time, we might see the price of silver explode. We expect that the price will be around the $ 22 level at the end of this year. The big correction in the silver price, that we keep waiting on, should result in a real price explosion . We predict this will take place in beginning of next year. A price of $ 50 or even $ 60 is not unthinkable. Read our previous post on silver to learn why this will happen.

Conclusion, for both gold and silver we remain bullish. The last chance to buy at a reasonable price is now! The biggest “discount” however, is to be found in silver.

Today the G-20 summit in Pittsburgh will commence. Many world leaders are now convinced that the dollar should be replaced by a new monetary standard, we might be on the brink of a new Bretton Woods. In November 2008 Gordon Brown and Nicolas Sarkozy were the first to publicly state that the current system is out-of-date and that a new world monetary standard is needed. Gordon Brown stated that a new Bretton Woods Conference should take place. Article in the Times. The IMF has posted an interesting article on its website, preparing the world for a new conference. Since many renowned economist are calling for a new Bretton Woods like conference we can only hope that today’s world leaders are brave enough to show leadership and take action.

But how should this new system look like?

For many reasons gold on its own is not likely to return to its historical importance. It is most likely that a new currency is created where it’s value is measured by a basket of the most important currency’s, oil, gold and other commodities. This idea is not that new, in fact John Maynard Keynes called for it in the Bretton Woods conference. The name of the proposed currency was the Bancor. The U.S. government was so powerfull that it could push forward their proposal of fixing the gold price to the US dollar, so this plan eventually won. This system worked till 1971, after that the costs of the Vietnam War became so great that the Fed had to print so much money that the ratio could not longer be sustained. In the meanwhile European countries like France started demanding gold instead of the dollar, and shiploads were being pulled from Ford Knox. The US government was forced to let the fixed gold price go, and also stop the ban on gold ownership for US citizens. From 1972 till 1980 the price of gold exploded. If we correct the gold price of 1980 with inflation the price was $ 2000 an ounce in today’s dollars.

We will follow the G-20 summit with great interest and hope that the leaders will show leadership and vision. Will they finally decide that a new Bretton Woods should take place, or are they even more decisive and let Pittsburgh become the new Bretton Woods.

Today the IMF announced that it will sell off one-eighth of the agency’s gold reserves, without disrupting the gold market. Both this report and a sharp rise of the US dollar made gold drop below the $ 1000 mark again. The price picked up again after it became clear that China is considering to buy it!

What really amazed me was the fact that the gold price did not drop below the $ 950 mark after the first report. 403 Tons of gold is a hell of a lot of gold! The news that China jumped in within hours did not surprise me at all. The Chinese really want to get rid of their soon to be worthless dollars don’t they?